GM invests $500 million in Lyft

BN-LY132_0104GM_J_20160104045037At the beginning of the year, the U.S’s largest car manufacturer, General Motors, invested $500 million in the Silicon-Valley based ride-share company, Lyft. The investment represented half of Lyft’s latest round of fundraising which would ultimately lead to a $5.5 billion valuation of the company. This made headlines in many of the big news sources as this seemed to be a partnership aimed at combining Lyft’s technology that matches customers with drivers and autonomous vehicle capabilities being developed by GM. While the goal of this partnership seems to be having a silo whereby autonomous vehicles wait until they are “hailed” by a customer using an app, this is not likely to happen for another 10 or so years. In the interim, the two companies are joining forces so that GM will rent their cars to Lyft drivers at a large discount. The partnership also seems to be a strategic move on GM’s part to perhaps curb any potential influence companies like Apple or Alphabet may have on the autonomous vehicle market. However, GM isn’t the only player that’s interested in developing car-phone software as Ford and Toyota announced that they would be working on developing software the links phone apps and car dashboard screens. Many questions arise from this announcement for me: are auto manufacturers planning to sell self-driving/autonomous vehicles to the public? Also, how will the consumers respond to vehicles that drive themselves? I personally like driving cars and would not like to give up the privilege of being able to do so, however I’m not sure whether this is where the industry may be heading; the goal of this partnership seems as if it will only be ride-sharing via autonomous vehicles in urban settings, but there could be a larger plan behind all of this.

Sources:

http://www.reuters.com/article/us-gm-lyft-investment-idUSKBN0UI1A820160105

https://blog.lyft.com/posts/lyft-1billion-gm

http://www.wsj.com/articles/gm-invests-500-million-in-lyft-plans-system-for-self-driving-cars-1451914204

4 comments to GM invests $500 million in Lyft

  • barnettt18

    I find this blog post interesting because it highlights the different roles beyond manufacturing that automakers have begun to play in the twenty-first century. General Motors has a venture capital subsidiary named GM Ventures that injects capital into start-ups and private organizations that do not have a direct tie to automotive production. As many strains of finance and investment move toward private equity, General Motors is at the forefront of this movement with its investment capital firm GM Ventures. GM Ventures is among many private equity firms in Detroit that draw millions of dollars from automotive executives there. I’m curious: does anyone in this class know about other forays into venture capital made my automotive companies? I have personally only heard of GM Ventures having a direct correlation to General Motors, but I would be interested to hear about other developments. Please reply to this comment if you know about other firms.

    Thomas Barnett

  • helgansg18

    Thomas, in regards to your question about entrances of the automative industry giants into venture capitalist firms I know that while Ford does not officially have a subsidiary like GM Ventures, one of the members of Ford’s board also runs Greylock a VC firm. Also Bill Ford, the great grandson of Henry is part of Fontinalis. It is interesting that GM is at the forefront of this movement and I think it is a brilliant acquisition by them to scoop up Lyft and other successful start-ups.

  • platte16

    GM’s move to rent cars to Lyft is a great way to market their cars. Not only will the driver have the experience of driving a GM but also the passengers which may lead one or both parties to purchase a car. Also, the number of GM cars on the road will lead to a sense of popularity rise, influencing other drivers on the road towards purchasing a newer model.

  • Interesting discussion. To what extent is this (merely?) an expensive marketing ploy, akin to taking a stake in a rental car company and then turning that into a captive market? To what extent will they get other benefits in technology? Will Lyft prove profitable, so that GM will make a profit on its investment just as any other venture capital firm would seek to realize?

    Note that GM has stakes in a number of other firms, I can provide details from a recent conference presentation by GM’s (just retired) Chief Technology Officer that covered three specific investments.

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